03 Nov Four tips for businesses (especially start ups)

Why do so many promising start-ups go off the rails? Often they have trouble expanding controllably. Business founders may resist imposing discipline for fear of losing agility and control—but the price may be chaotic operations and unpredictable performance.

I suggest four activities that can help companies handle greater complexity as they seek new avenues for growth:

1. Hire specialists in functions such as business advice, sales, HR, marketing, R&D, and manufacturing. This lets them tackle work more efficiently and catalyses future growth by creating opportunity in the rest of the organisation.
2. Add management structure. A few people at the top can’t effectively supervise everyone’s increasingly specialised daily work—and it’s hard for employees to stay focused and engaged without guidance and processes.
3. Establish a framework of plans and goals. Otherwise, improvisation may amount to aimless criticism.
4. Sustain the culture. Articulate the founding values in mission statements and job descriptions, and hire and reward for cultural fit.

Between the extremes of ad hoc and accepted organising lies a useful middle ground—and leaders who can find it gain an important edge on their rivals.

The Dilemma

Business founders often resist bringing discipline to their growing start-ups, for fear of losing agility and control. But then, ironically, operations become chaotic and performance suffers.

The Tactics

Manage growth for the long term by seeking business advice, hiring functional experts, adding management structure, beefing up planning and forecasting, and continually reinforcing your organisation’s cultural values. This is where your Business Connect representative can be helpful.

The Rewards

This approach to expansion won’t just make your business more efficient—though it will certainly do that. It will also help you find and exploit new opportunities.

Consideration

Why do so many start-ups that seem to have it all—customers, cash, a promising outlook—run off the rails?
Start-ups these days grow so rapidly that it’s difficult for them to correct course once they recognise missteps. They can improve their prospects by understanding the mechanics of effective expansion (known as scaling) before they reach that moment of truth. We at the Business Connect team can help identify this and help re-strategise through a number of helpful online tools specifically tailored to your circumstances.

Considering the four (4) activities in greater detail:

1. Look for experts

Organisations must hire functional experts to take the enterprise to the next level, add management structures to accommodate increased head count while maintaining informal ties across the organisation, build planning and forecasting capabilities, and spell out and reinforce the cultural values that will sustain the business.
It’s easy to misconstrue these activities as replication—as merely increasing the capacity and efficiency of what you’re already doing. But they’re also about handling greater market and organisational complexity as you seek different avenues for growth. That can mean developing new products or services, entering new markets, or engaging in other forms of innovation.
Many entrepreneurs will resist these activities. They often develop strategies opportunistically, lacking a frame of reference because they are starting from scratch, and they take a similar ad hoc approach to building their organisations. Business founders tend to view formal structures and processes—elements common to all four activities—as bureaucratic threats to their entrepreneurial souls. They also worry about losing speed, control, and team intimacy. When they abandon order and discipline, however, they pay a steep price: chaotic operations and unpredictable performance.
Expansion doesn’t mean that ventures should reject their start-up identities and embrace large-company dogma once they’re poised for growth. But those prepared to manage that growth—and to learn new ways of operating and behaving—stand a much better chance of making it in the long term.
This is where I believe many businesses will find value in the Business Connect services we are offering.
Business founders typically do a bit of everything—basically, whatever it takes to get the business off the ground. Through informal channels, they hire fellow generalists, who bring together their roles and responsibilities partly by pursuing their own passions and partly by looking around and seeing what needs to be done. This idiosyncratic “all hands-on-deck” approach can work fine in the beginning when adrenaline is high and the company is small. But as organisations expand, they face new levels of complexity that require them to define and assign tasks more formally.
To accomplish this, they typically seek specialisation in select functions, such as independent business advice, sales, human resources, marketing, R&D, and manufacturing. This benefits them in two ways. First, the specialists use their knowledge to tackle their functions’ work more efficiently. Second, as they introduce and implement best practices within their domains, they catalyse future growth by creating opportunities in the rest of the business.

2. Adding Management Structure

When launching their start-ups, many business founders abandon hierarchy because of their egalitarian (democratic) ideals. But as their organisations expand, a growing number of people report to a handful of leaders. Business founders may think this allows them to remain in command because all decisions pass through them. But ironically, their organisations spin out of control as centralised authority becomes a bottleneck that hinders information flow, decision making, and execution.
A couple of people at the top can’t effectively supervise everyone’s increasingly specialised day-to-day work; in such a system, accountability for organisational goals gets lost. And employees find it hard to remain focused and engaged when they don’t have managerial guidance and processes. They may become frustrated as they struggle for access to decision makers who are juggling many other projects and people.

3. Planning and Forecasting with Discipline

Improvisation is integral to young ventures; it’s how they make discoveries. However, as organisations grow they need a framework of plans and goals to guide them. That way they can keep trying new things and reacting to dynamic markets, but with an eye toward larger objectives and sustaining the business. Otherwise, improvisation essentially amounts to aimless criticism to those who are not part of the ‘buy-in’.

4. Sustaining the Culture

Culture is typically a big part of what draws people to join start-ups—and what keeps them going. As employees battle the odds to turn a fledgeling business into a viable company, working late nights and weekends to make it happen, they’re motivated by camaraderie and a sense of belonging to something important.
Business founders recognise how powerful this is and rely on nostalgic, almost mythic, stories about the organisation’s first days to get everyone to embrace the culture. That can work while a venture is small and all the employees can personally relate to those stories—but as more people come aboard, leaders may struggle to maintain a strong organisational culture. That’s a problem, because culture may be most important during periods of growth. As a venture starts to formalise its functions and reporting chains, identifying with the larger organisation helps employees work across boundaries and engage in the spontaneous collaboration and exchange of ideas the company needs to innovate.
Although business founders of fast-growing organisations say they worry about losing their organisational culture, few take steps to systemise and reinforce it. Their attention quickly shifts to things that feel more urgent, such as operations and marketing. As a result, employees’ motivation and engagement slip and people leave, hoping to recapture the magic somewhere else.
How can entrepreneurs prevent these consequences? They can start by clearly articulating their cultural values in their mission and vision statements and in job descriptions. That makes it easier to recognise cultural drift before it goes too far. It also helps the organisation keep its values alive by hiring for cultural fit and rewarding desired behaviours through recognition and compensation.

If any of this rings any bells or seems familiar within your organisation, please feel free to contact the Southern Region Business Enterprise Centre where we can offer helpful guidance to address these and many other business-related concerns.